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Exclusions From Gross Income: Atty. Richard M. Fulleros, Cpa, Mba

Proceeds from life insurance and return of premiums are excluded from gross income, as they are considered returns of capital rather than gains. Other exclusions include gifts, interest on government securities, compensation for injuries, retirement benefits that meet certain criteria, and income exempt under treaties. Exclusions are not taxable because they are exempted by law or do not meet the definition of taxable income.

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Luntian Amour Justo
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40 views10 pages

Exclusions From Gross Income: Atty. Richard M. Fulleros, Cpa, Mba

Proceeds from life insurance and return of premiums are excluded from gross income, as they are considered returns of capital rather than gains. Other exclusions include gifts, interest on government securities, compensation for injuries, retirement benefits that meet certain criteria, and income exempt under treaties. Exclusions are not taxable because they are exempted by law or do not meet the definition of taxable income.

Uploaded by

Luntian Amour Justo
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© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
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EXCLUSIONS FROM

GROSS INCOME
ATTY. RICHARD M. FULLEROS, CPA, MBA
ITEMS EXCLUDED FROM GROSS INCOME

Exclusions are income received or earned but not taxable as income because they are
exempted by the Constitution, law, treaty or they do not come within the definition of
income in taxation. Such tax-free incomes are not included in the income tax return unless
information regarding them are specifically called for.
EXEMPT FROM GROSS INCOME

• Proceeds of life insurance


• Amount received as return of premium
• Gifts, bequests and devises
• Interest on government securities
• Compensation for injuries or sickness
• Income exempt under treaty
• Retirement benefits, pensions, gratuities, etc.
• Other income expressly exempt from tax
PROCEEDS OF INSURANCE

• Are paid to the heirs or beneficiaries upon the death of the insured, whether in a single
sum or otherwise. The reason for non-taxability is that such proceeds are considered
more as an indemnity rather as a gain or profit
RETURN OF PREMIUMS

• The amount received by the insured as a return of the premiums paid by him under the
life insurance. The reason for its non-taxability is that it is a return of capital.
GIFTS, BEQUESTS, AND DEVISES

• Refers to property acquired by gift, etc. These are excluded from gross income, provided
that these are given without receiving anything in return, or out of pure liberality.
• The income from such property like rental from apartment, or building, is part of the
gross income.
COMPENSATION FROM PERSONAL INJURIES

Amounts received through accident or health insurance or under the workmen’s


compensation act. These are excluded form gross income because they are considered as a
mere return of capital.
INCOME EXEMPT UNDER TREATY

Income of any kind, to the extent required by any treaty obligation binding upon the
Government of the Philippines is exempt from income tax. The basis of the non taxability
is reciprocity
RETIREMENT BENEFITS

Retirement benefits under RA 7641 (retirement of private employees) and those received by
officials of private firms. These are excluded from gross income if the following are
present:
1. Reasonable private benefit plan
2. Retiring employee was in service for at least 10 years
3. Retiree must not be less than 50 years old
4. Retiree must not have previously availed of any retirement benefit plan
OTHER BENEFITS

• SSS benefits
• US Veterans
• SSS and GSIS
• Income of foreign government
• Prizes and awards - not taxable if recipient was selected without action on his part, and is not
required to render future services
• 13th month pay and other benefits - up to the extent of P90,000.00
• Minimum wage earners

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